THE EFSE DEVELOPMENT FACILITY A RELIABLE PARTNER IN ...Finance 06. TECHNICAL ASSISTANCE WHEN AND WHERE IT COUNTS The EFSE Development Facility A reliable partner in challenging times

AGRICULTURAL FINANCEURAL FINANCE

SECTOR TECHNICAL ASSISTANCELOCAL CURRENCY LENDING

HOUSING FINANCE

MOBILE FINANCIAL SERVICES

APPLIED RESEARCH

THE EFSE DEVELOPMENT FACILITYA RELIABLE PARTNER IN CHALLENGING TIMES

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THE EFSE DEVELOPMENT FACILITY – MAXIMISING IMPACT

MISSIONThe EFSE Development Facility (EFSE DF) deploys effective, targeted and innovative technical assistance to maximise the impact and outreach of the Fund’s development finance mandate in its target countries and to the final target groups i.e. micro and small enterprises and low-income private households.

01. OUR APPROACH

03. PROJECT CYCLE

The EFSE Development Facility A reliable partner in challenging times

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02. FUNDING

05. PROJECTS

04. TOPICS

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ResponsibleFinance

LocalCurrency Lending

HousingFinance

MSEFinance

MobileFinancialServices

AgriculturalFinance

06. TECHNICAL ASSISTANCE WHEN AND WHERE IT COUNTS


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01. OUR APPROACH

The EFSE Development Facility (EFSE DF) responds to specific requests for support from the EFSE’s partner lending institutions and also proactively identifies their technical assistance or capacity building needs. In this way, the EFSE and the EFSE DF work hand in hand to build and reinforce long-term partnerships that maximise development finance impact and outreach.

Our approach adheres to the following principles:

• Focused, high-impact supportTechnical assistance focuses on key areas or processes in the partner lending institutions. To ensure impact, the EFSE DF provides a combination of dedicated consulting services, training and on-the job coaching. Technical assistance is structured in short-term, intensive intervals to allow institutions to absorb and implement training and consulting input.

• Consultant qualityConsultants and trainers are carefully selected jointly by the EFSE DF and the partner lending institutions. The EFSE DF also draws on local expertise to support the development of local know-how.

• Cost sharingTechnical assistance is provided on a cost sharing basis, strengthening ownership and commitment on the part of partner institutions.

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PROJECT TYPES

The EFSE DF focuses on three types of activities:

• Individual Technical AssistanceThe EFSE DF supports partner lending institutions in building their capacities to efficiently and effectively serve micro and small enterprises (MSEs) and low-income households in a sustainable manner.

Individual technical

assistance to financial

institutions is the main

focus, accounting for

around 70% of projects.

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The EFSE DF has three sources of funding, each one accounting for approximately one third of its total finances.

02. FUNDING

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The EFSE Development Facility’s funding sources are:

• A share of the EFSE’s investment profits which are set aside on an annual base by the Board of Directors;

• Donors from the development finance community who have a stake in the EFSE DF’s mission and provide general funding or earmark their grants to specific countries or projects; and

• EFSE partner lending institutions, which are required to share in the costs of the technical assistance and training support.The average cost share of our partner lending institutions is around 30%.

Funding for the EFSE DF is held in a separate trust, ensuring inde-pendence between investment activities and technical assistance.

• Sector Technical AssistanceThe EFSE DF works with sector bodies in supporting transformational processes within the financial sector to improve the financial infrastructure. Sector bodies include central banks, microfinance and banking associations, and debt advice centres.

• Applied ResearchThe EFSE DF sponsors and conducts studies to address institutional as well as sector needs and challenges, identify market trends, and monitor development finance impact.

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03. PROJECT CYCLE HOW WE WORK

More than 60 partner insti-tutions directly supported so far

More than 400 financial sector stakeholders reached in all partner countries so far

More than 35 research projects on the financing needs of the agri-cultural and MSE sectors, including longitudinal de-velopment impact studies, so far

3 APPROACHES TO MAXIMISING DEVELOPMENT IMPACT AND OUTREACH

Main office in Frankfurt, Germany

12 regional offices and contact points

ACTIVITIES COVER SOUTHEAST EUROPE AND THE EUROPEAN EASTERN NEIGHBOURHOOD

GUIDANCE FROM THE EFSE DEVELOPMENT FACILITY COMMITTEE

– Represents the EFSE DF’s donors (BMZ, SDC, FMO, OeEB) – Evaluates and approves all projects– Develops the EFSE DF’s strategy

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TA MANAGEMENT: TRANSPARENT AND INDEPENDENT

Management of EFSE DF funds

Project development and management

EFSE DF technical assistance team supported by the Investment Management, Risk Management, Strategy& Planning, and IT teams

< >

Individual Technical

Assistance

Sector Technical

Assistance

AppliedResearch

ConsultantsPartner

Institutions

Fiduciary Agent


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AgriculturalFinance

HousingFinance Mobile

FinancialServices

The EFSE DF offers individual technical assistance in the areas of: – Core Capacity Building– Strategic Advice– Business and Product Development– Sales and Marketing– Client Education – (Credit) Risk Management– Operational Efficiency and Cost Management– Management Information Systems– Internal Control and Audit

The EFSE DF will also meet requests of partner institutions for specific assistance in other areas of operation.

Since 2006 more than 250 projects with a volume of over EUR 10 million

MSEFinance

ResponsibleFinance

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04. TOPICS

LocalCurrency Lending


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05. PROJECTS IN FOCUS

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EXPANDING AGRIFINANCE IN UKRAINE

The successful development of an innovative agricultural loan risk assessment tool for Megabank Ukraine is a good example of the way in which the EFSE DF supports the Fund’s development finance mandate, specifically in its strategy to expand investment activities in the agricultural sector. Following a thorough needs analysis, the risk assessment tool was jointly developed with Megabank and was then integrated into the bank’s operations, along with accompa-nying training and workshops for staff to ensure sustainability and effectiveness. This approach was highly valued by Megabank.

AgriculturalFinance REALISING THE

POTENTIAL FOR MSE FINANCE

In line with the Fund’s mission, the EFSE DF strongly focuses on measures to improve the micro and small enterprise (MSE) financing capabilities of partner institutions and to assist them in targeting MSE clients with responsible and appropriate products and services in a sustainable manner. Typical individual technical assistance projects involve, for instance:• Setting up a dedicated MSE division at the head office level,

including the development of a long-term strategy, organisational structure, policies, and marketing and sales tools;

• Structuring MSE lending activities at the branch level, including loan officer training;

• Product development, sales training and risk management.

MSE FINANCE


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ResponsibleFinance ENHANCING

FINANCIAL LITERACY

Supporting the financial sector of target countries in ensuring fair, transparent and inclusive access to credit is core to the EFSE DF’s strategy. And educating borrowers to achieve financial empower-ment is an important stepping stone in that process. In this regard, the EFSE DF has developed different financial education brochures which explain the risks of foreign currency loans and highlight the various questions clients should ask before taking out a loan. The target groups for such publications are MSEs and clients who take out mortgage loans. The mortgage brochure is also explained in a separate video. The brochures exist in eight local languages: the print run of close to 200,000 copies is going to PLIs in eight EFSE partner countries. The EFSE DF has also developed a simple slide chart, which allows MSEs and private borrowers to calculate the costs of business or private loans. Apart from producing its own publications, the EFSE DF has sponsored sector organisations such as the Independent Association of Banks in Ukraine in its financial literacy outreach activities to bank employees, MSEs, schoolchil-dren, and pensioners. In addition, the EFSE DF has conducted Responsible Finance workshops on topics such as foreign currency exchange risks and consumer protection.

TRAININGSPONSORSHIP PROGRAMME

The EFSE DF launched the Training Sponsorship Programme in 2008 for building capacities at the Fund’s partner institutions to provide financing for micro and small enterprises in a responsible manner. This initiative flexibly and effectively addresses the specific areas in which partner institutions see a potential for improve-ment by enhancing their staff’s expertise. Sector organisations are eligible for trainings under the programme as well. Since 2008, the EFSE DF’s Training Sponsorship Programme has supported over 40 partner institutions in 14 countries. A range of activities can be sponsored, including external and in-house training seminars and workshops. Here are just two examples of the latter: the in-house seminar organised for 40 MSE credit experts of Bank of Georgia and the internal customer relationship skills workshop for 130 loan officers at EKI in Bosnia and Herzegovina. Other examples include trainings provided by Euromoney, E&Y, KPMG, PWC and Frankfurt School of Finance and Management in areas such as corporate governance, international financial reporting standards, risk management, MSE banking, housing finance and microfinance. Online courses, conferences and exchange visits, too, fall under the programme’s scope.

Capacity Building


1010


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APPLIED RESEARCHNext to providing technical assistance at the partner lending insti-tution and financial sector levels, the EFSE DF’s third core activity is to keep abreast of market developments and track development finance impact through applied research. Some examples of applied research studies undertaken by the EFSE DF can be found below. All are focused on the Fund’s final target groups of MSEs and low income households:• Studies on the financing needs of the agricultural sector

in Ukraine, Kosovo and Romania to identify the gaps and opportunities, as well as to assess the specific challenges faced by the financial institutions serving the sector.

• A longitudinal impact study conducted over three years in Armenia, Serbia and Montenegro to monitor the development impact of the EFSE’s activities on its final target groups, specifically the impact of the quality of financial services on job creation. Research areas include assessing the impact of consumer loans on clients whether loan currency matters for job creation and employment stability, or whether different lending techniques have an impact on repayment.

• A study that offers new insights into the financial needs of small enterprises in Armenia, Serbia and Romania. This research project aims to identify gaps in the provision of financial products and services to micro and small enterprises, and point to ways in which the Fund and its partner lending institutions could address them.

AppliedResearch

NEXT-GENERATION FINANCIAL SERVICESThe workshop ‘Mobile Financial Services in the EFSE Region:What is the Business Case?’ is an example of how the EFSE DF supports its partner institutions in increasing outreach and saving costs through alternative delivery channels and new technologies. It brought together the representatives of 20 partner institutions and financial sector bodies for an in-depth exchange on the opportuni-ties and challenges of mobile banking in the EFSE’s target regions. It also focused on practical tools for advancing products and servic-es in a responsible and efficient manner.The combination of top-notch consulting experience and high inter-est in follow-up technical assistance from the EFSE DF was a clear indication of the value – and success – of this pragmatic workshop.

MobileFinancialServices


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Since its inception in 2006 the EFSE DF has consistently demon-strated it is a strong partner in difficult times. The EFSE DF recog-nises that the global economic downturn and the Eurozone crisis have wrought extensive changes, both in the operations of financial institutions as well as of MSEs in the EFSE’s target regions and in terms of their needs for financial services. In this regard, the EFSE DF is committed to providing focused support to financial insti-tutions so they can provide responsible financial services to their clients in a challenging economic environment. Key areas such as operational efficiency, risk management, product development and training are all covered to support institutions in the Fund’s partner countries. The EFSE DF also advises microfinance institutions which are undergoing transformational processes as a result of market and/or regulatory changes.

06. TECHNICAL ASSISTANCE WHEN

AND WHERE IT COUNTS

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DISCLAIMERThe European Fund for Southeast Europe (EFSE) is reserved for institutional investors. Units in this investment fund may not be offered, sold or transferred, directly or indirectly, in the USA or its territories or possessions or areas subject to its jurisdiction, or to citizens or residents thereof other than in accordance with the laws of the United States. The information given in this document constitutes neither an offer nor a product recommendation; it is provided for individual information purposes only. No guarantee is given or intended as to the completeness, timeliness or adequacy of the information provided herewith. Past performance is no guarantee for future results. The value of the fund and its share classes is calculated without taking into account any placement or redemption fees and assuming constant reinvestments of dividends. This is not a fund prospectus as specified by law. The fund prospectus is obtainable free of charge from Oppenheim Asset Management Services S.à r.l., 4 rue Jean Monnet, L-2180 Luxembourg.

© EFSE Development Facility 2014This work is protected by copyright law. All rights reserved, particularly with respect to translation, reproduction, communication, copying of images and tables, broadcasting, microfilming or reproduction by other means, as well as storage on data processing equipment, even where such use only applies to excerpts. Reproduction of this work or parts of this work is only permissible within the boundaries of the statutory provisions.This publication can be downloaded or ordered here: www.efse.lu

www.efse.lu

EFSE Development FacilityMs Gemma FerstTheodor-Stern-Kai 1D-60596 Frankfurt am Main, GermanyT +49 (0) 69 97787650-262

F +49 (0) 69 97787650-10

E [email protected]

CONTACT INFORMATION

INITIATOR AND LEAD INVESTOR FUND MANAGER FUND ADVISOR

EFSE DEVELOPMENT FACILITYfunded by

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THE EFSE DEVELOPMENT FACILITY A RELIABLE PARTNER IN ...Finance 06. TECHNICAL ASSISTANCE WHEN AND WHERE IT COUNTS The EFSE Development Facility A reliable partner in challenging times